Nordic American Tanker: Be Prepared for Fluctuations

| About: Nordic American (NAT)

Nordic American Tanker (NYSE:NAT) has announced it has purchased an additional double-hull suexmax tanker. This will give them 13 tankers in service and 2 new-buildings on order. The price of the tanker was $56.7 million, delivery will be in mid March and it will be immediately accretive to earnings. Nordic American has no debt and an unused $500 million credit line. To quote the press release: “The acquisition is expected to be financed from out of the Company’s financial resources.”

Also in the press release was the news that the 4th quarter dividend is expected to be approximately 85¢. This is a drop from the $1.50 to $1.60 range of the last few quarters, but still a 10% yield on the current stock price. Spot rates per day averaged in the $40k range. My observation of the spot rates for the quarter put my guess at the average rates closer to $50k and I was expecting the dividend to be around $1.20. Missed by quite a bit!

NAT contracts almost all of its tankers on the spot market and dividends will fluctuate greatly quarter to quarter. I like the company because of its low cost structure, conservative management and long term dividend payout. Over time, Nordic American Tanker will provide a significant, high income to investors. Just be prepared for the fluctuations.

Disclosure: NAT is a component of my site’s Income and Opportunities Portfolios and a personal holding.